What Sells Best Online

By Vincent Ryan
Mar 11, 2003 4:00 AM PT

The e-tail universe has seen tremendous consolidation since the dot-com bubble
burst. The list of online-only retailers that wound up on the Internet scrap heap
is too long to mention. But the idea of selling consumer products to people via
the Internet has not suffered. Indeed, more people are buying online every day.

Air travel, consumer electronics and apparel are three of the hottest categories
of consumer products sold online, IDC research manager Jonathan Gaw told the E-Commerce Times. The question on the minds of many small e-tailers may be, why are these the standouts -- and can they enter the fray and achieve success by targeting these areas?

Big-Ticket Bonanza

Online is "an optimal place for big-ticket items … that you want
to spend some time shopping for," Don Addington, director of business operations at
Travelocity.com, told the E-Commerce Times. "Other online channels haven't offered consumers
the same level of involvement in the shopping research process. It's also an
overall lifestyle change. People find it more advantageous to sit down and
turn on their computer than to get into the car and drive to a travel agency."

That is one reason why online air travel purchases have survived the terrorism threat
and continue to grow at a fast pace, Addington said. In 2002, about 12 to 15 percent of
travel purchases in the United States were booked online.

Travel also is well suited to online retailing because it is a service -- the buyer
does not have to "try anything on," Addington noted. The public is also familiar
with the product, and nothing has to be shipped, especially given the increased
use of electronic ticketing in the airline business.

Trying on Apparel

It stands to reason that books, music and videos are a hot category: They were the
first products to sell in mass quantities online, and they still represent the lion's share of consumer goods sold through the Internet. But other categories are catching up.
Recognizing this, established online retailers, such as
Amazon.com are branching out.

For Amazon, sales in the books, music and DVD/video segment grew 14
percent in the fourth quarter. Electronics, tools and kitchen accessories grew
21 percent. But the fastest-growing "store" was the e-tailer's newest category --
apparel and accessories. This category, which includes brands such as Levi-Strauss,
the Gap and Nordstorm, was the fastest-growing store in terms of units sold in the first
60 days after it opened in November 2002.

"Amazon.com is doing a much better job of partnering with brick-and-mortar
players like Target and Toys 'R' Us," Gaw said. "They're looking to replicate
those arrangements with other companies."

Tangible Limits

Sales of some items are still limited by the "tangibility" factor, however.
For example, consumer electronics is a hot category, but some electronics products
simply will not sell online because customers need to touch and feel them before
making a purchase decision, Yankee Group senior analyst Ryan Jones told the E-Commerce Times.

Jones added that online salability depends on whether a product is bought with
qualitative or quantitative factors in mind. Televisions and stereos are a prime
example of qualitative products that many customers want to test in person
before buying. In contrast, quantitative products like
MP3 players,
home networking kits and
cell phones -- for which feature comparisons often
come down to a numbers game -- sell well on the Web.

Complementing Offline Stores

Walmart.com, one of the most innovative e-tailers, is finding that
depth of offerings counts as much as breadth.

At Walmart.com, the goal is to complement what consumers can find in
Wal-Mart's ubiquitous retail stores, said Cynthia Lin, a spokesperson for
the site. "Customers are gravitating toward items that they can't necessarily
find at the Wal-Mart store -- they want the deep assortment in certain categories.
It makes sense because the stores have limited store space; online we have no space
restrictions."

For that reason, consumer electronics are selling well online, Lin said, as
is home furniture. Mattresses have been doing particularly well, and they
are not even offered in Wal-Mart's physical stores. "I think customers are
also looking for the convenience of having it delivered straight to [their]
door," Lin noted.

Using the Medium's Strengths

Jewelry is another product category that is selling well for Wal-Mart. Lin said
one reason for this category's performance is a "ring configurator" that allows
online customers to design their own keepsake diamond rings by inputting the
shape of the stone, diamond size and quality, ring setting and ring size.

But Wal-Mart also has recognized that services are a profitable
area to be in. Two months ago, the company launched an online DVD rental
subscription service. Buyers pay US$18.86 for unlimited rental time of a
DVD that is delivered straight to their door. Walmart.com also hawks
cruises and rental cars and operates its own Internet service provider.
"Most of our services have been well received," Lin said.

If at First You Don't Succeed…

Some products, of course, never will sell well online. Pet
food and products have been a disaster, as have groceries. But that does not
mean new companies will not crop up, trying to cash in on what seems like a
great idea.

The dot-com crash, the sagging economy and the threat of imminent war
with Iraq have not stopped consumers from buying online, or stopped online retailers
from increasing the number and types of products they hawk on the Internet, Addington
said. But they do have to be careful about spreading themselves a mile wide and an inch
deep.